The Best is Over for Salesforce, Says Analyst
"CRM did extremely well in competing and in winning against other startups, but competing effectively against a superior technology from ORCL is going to be extremely challenging," Trip Chowdhry, the Managing Director of Equity Research at Global Equities Research, wrote in an e-mail update on the stock this morning.
"Salesforce.com['s] cost of doing business, both on R&D front and sales and marketing, will continue to increase moving forward, and their win-rates will start to decrease. The best is over for Salesforce.com (NYSE: CRM)."
Chowdhry's comments come after the company confirmed its plans to purchase Buddy Media for $689 million. As of this writing, shares of Salesforce are down roughly 2%.
"We don't [think] this CRM acquisition of Buddy Media is something for investors to cheer about," Chowdhry continued. "Instead, investors may need to accept the fact that starting June 6, with the entry of Oracle (NASDAQ: ORCL) into SaaS (Software-as-a-Service), the industry structure will be altered, and CRM['s] market position will start to gradually erode, most likely within one-third of the its customer base, which are large corporations."
Finally, Chowdhry said that with the launch of the Oracle Public Cloud, the company will introduce a "major technological challenge" to Salesforce. "CRM architecture may head to obsolescence sooner than some may think, as it is based on multi-tenancy, which is implemented at the database level," he wrote. "Salesforce.com's architectural limitation prohibits data to be moved seamlessly between Public Cloud and Private Cloud. Oracle SaaS is built on VMs (Virtual Machines), and this allows the customer data to move seamlessly between Public and Private Cloud, which our research indicates large corporations want, and CRM cannot deliver."
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